Many people have been asking about workers compensation when reviewing their wealth protection plans. Seeing a need to educate, we sourced content for this article from our research partner, ThreeSixty. This article will focus on the employer provided workers compensation benefits and the “tips and traps” of these plans including:
- What is workers compensation insurance and what is covered under the policy?
- What are the entitlements under workers compensation?
- What are the limitations of workers compensation cover?
- How does workers compensation differ from Income Protection Insurance?
An extract from a publication prepared by ThreeSixty, a division of GWMAS, appears below.
What is workers compensation insurance and what is covered under the policy?
Workers compensation insurance is compulsory insurance provided by the employer for all employees. Benefits are only payable for accidents which occur whilst completing the daily work related activities, including travelling to and from work. This does not extend to include sickness, unless it is directly work related and approved by the workers compensation provider.
Workers Compensation benefits are payable for death, incapacity to work, permanent loss or impairment to the body, and the need for rehabilitation or hospitalisation as a result of an injury which occurred during the activities of their work. The level of benefit payable is dependent on the state of residence, with some states providing more generous payments.
Proceeds from Workers Compensation benefits are assessable as income for tax purposes.
What are the entitlements under workers compensation?
(The below entitlements are correct as at September 2011)
The Workers Compensation Act (1997) and the Workplace Injury Management Act (1998) establishes provision for the compensation of workplace injuries. Entitlements vary between states, as outlined below.
New South Wales Source: www.workcover.nsw.gov.au
This benefit is limited to the award wage and no more than $1805.00 per week for the first 26 weeks of invalidity. After 26 weeks, this benefit is limited to no more than $424.50 for clients under an award or $616.10 where no award exists.
After 26 weeks, the claimant would need to reconsider their circumstances if it is a long term claim.
Additional benefits are payable where there are financial dependants.
Benefits will be reduced for partial disability claims.
Victoria Source: www.workcover.vic.gov.au
Totally disabled: This benefit is limited to 95% of the pre-disability earnings and no more than $1930.00 per week for the first 13 weeks. For 14-130 weeks, this benefit is limited to 80% of the pre-disability earnings and limited to no more than $1930.00 per week.
After 130 weeks, the benefit is limited to 80% of pre-disability earnings and no more than $1930.00 per week.
Partially disabled: The benefit is limited to 95% of the pre-disability earnings, and no more than $1930.00 per week for the first 13 weeks. Between 14 weeks to 130 weeks, if the claimant has returned to work, this benefit is 80% of pre-disability income less 80% of what they are currently earning to a maximum of $1930.00 per week. If they have not returned to work, benefits remain at 75% of pre-disability income.
After 130 weeks and if the client is capable of working in any capacity but elects not to work, benefits will cease. A client can apply to have partial benefits extended beyond 130 weeks if they are working at least 15 hours per week and it is evident that they are working towards their rehabilitation.
Western Australia Source: www.workcover.wa.gov.au
If under an award wage: For the first 13 weeks, the benefit received is the regular award wage plus any benefits payable on a regular basis including overtime, bonuses and allowances. The maximum weekly amount is $2156.60.
From week 14, only the regular award wage is payable up to a maximum of $2156.60 (no additional benefits).
Not under an award wage: For the first 13 weeks, the benefit received is the regular award wage plus any benefits payable on a regular basis including overtime, bonuses and allowances. The maximum weekly amount is $2156.60.
From week 14, the regular award wage is a maximum of 85% of their pre disability income, not including overtime, bonuses and allowances to a maximum of $2156.60.
Queensland Source: www.workcover.qld.gov.au
This benefit is limited to no more than 85% of the insured earnings before disability for a period of 26 weeks. Beyond this period and for up to 104 weeks, claimants will be entitled to benefits of 75% of salary (or 70% of the QLD ordinary full time earnings). For benefits beyond 104 weeks, compensation is dependent on the degree of impairment.
South Australia Source: www.workcover.sa.gov.au
A totally incapacitated injured worker is entitled, for the first 13 weeks of their incapacity, weekly payments at the rate of 100% of their average weekly earnings. Between 14-26 weeks, the worker is entitled to 90% of their pre disability income. After 26 weeks incapacity, an injured worker is entitled to weekly payments at the rate of 80% of their average weekly earnings.
Benefits may continue to retirement age where the insured is significantly disabled.
Tasmania Source: www.workcover.tas.gov.au
For the first 26 weeks, 100% of income is paid. Between 26 weeks and 78 weeks, benefits are limited to 90% of average earnings or 95% where no suitable alternative duties are available. After 78 weeks, benefits are limited to 80% of the average earnings. The duration of the benefits are associated with the level of impairment.
What are the limitations of workers compensation cover?
Workers Compensation benefits are limited to work related injuries. Between October 2010 and September 2011, MLC reported that 60% of all claims were for sickness, compared to 40% for accidents.
Of the 40% accident claims, you would need to consider how many of these are work related and entitled to workers compensation benefits.
This means that those who rely on workers compensation cover alone, leave themselves unprotected against sickness and accident claims which occur on weekends, around the home or outside of the workplace.
Furthermore, the benefits are limited to a percentage of the pre disability income which may not include other benefits of employment, including salary packaging, commissions and overtime.
How does Workers Compensation differ from Income Protection Insurance?
Income protection provides cover for up to 75% of the monthly income for any medical reason which prevents the individual from not working, with the benefits commencing to accrue following the cessation of the waiting period. Additional benefits can be received where the insured has elected to purchase optional cover, such as nursing care allowance, advance benefits for trauma events to name a few. Cover is global and claims are payable for both partial and total disability with benefits generally available to age 65. Generally white collar occupations will not have their benefits offset against workers compensation claims, allowing the insured to claim from both sources. Premiums are tax deductible and benefits are assessable as income.
Workers compensation on the other hand is limited to work related claims with the amount of benefit varying between the state of employment and the duration of the disability. The maximum benefit period is dependent on the individual’s location with benefits ceasing as early as 26 weeks. Premiums are paid by the employer and benefits are assessable as income. There does not appear to be a waiting period with benefits accumulating from the first day of the accident occurring.
There is often a greater level of support from both WorkCover and the unions, for “return to work programs” for claims lodged through Workers Compensation, compared to an income protection policy given that the accident occurred in the course of their employment.
The information contained in this publication is current as at 11 October 2011 and is prepared by ThreeSixty, a division of GWM Adviser Services Limited ABN 96 002 071749, registered office 105-153 Miller Street North Sydney NSW 2060. This company is a member of the National group of companies.
Any advice in this publication has been prepared without taking account of your objectives, financial situation or needs. Because of this you should, before acting on any advice, consider whether it is appropriate to your objectives, financial situation and needs.
ast performance is not a reliable indicator of future performance.
Before acquiring a financial product, you should obtain a Product Disclosure Statement (PDS) relating to that product and consider the contents of the PDS before making a decision about whether to acquire the product.
To better understand the general concept of life insurance follow the link below to our website and then left click on “Understanding Insurance” – http://www.plan2prosper.com.au/benefits/understanding-series
With so many different types of life insurance available it’s important to discuss your needs with someone who has more than a basic understanding of the topic. Determining an appropriate insurance solution or an acceptable compromise can be very complex. A client commented to me it was a bit like an onion … at face value it’s just an onion, but the simple onion has many layers which can be peeled back, sliced, diced, cubed, filed, and cried.
To ensure you are adequately protected with a quality product, it is important to regularly review your existing arrangements and determine whether any cover provided by workers compensation and other existing insurance policies are sufficient to meet your needs.
As an adviser, my goal is to ensure that you are adequately protected, with a quality insurance product tailored to your individual circumstances.
Where to from here?
If you would like to discuss the topics raised or if you would like more information, speak to your financial adviser or contact Dan Smith of Plan 2 Prosper on 07 49265 570.
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Dan Smith is self employed and is for many families their trusted Financial Planner based in Rockhampton. He has clients in various locations throughout Australia but predominately in Central Queensland and specifically the geographic area encompassed by the Rockhampton Regional Council.
This information is intended to only provide you with general information and, while the sources for the material are considered reliable, no responsibility is accepted for any inaccuracies, errors or omissions. Before making a decision based on this information, you must consider its appropriateness having regard to your objectives, financial situation and needs. We recommend you obtain professional financial advice specific to your circumstances.
Dan Smith and Dancin Pty Ltd ABN 71 531 338 371 trading as Plan 2 Prosper are Authorised Representatives of GWM Adviser Services Limited ABN 96 002 071 749 trading as MLC Financial Planning, an Australian Financial Services Licensee, with its Registered Office at 105 – 153 Miller St, North Sydney NSW 2060
